Harbor Diversified Inc.
10/09/2026 | Press release | Distributed by Public on 10/09/2026 14:54
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read together with our audited consolidated financial statements, accompanying notes, and other financial information included in this Annual Report on Form 10-K for the year ended December 31, 2025 (this "Annual Report"). The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those expressed or implied by the forward-looking statements below. Factors that could cause or contribute to those differences in our actual results include, but are not limited to, those discussed below and elsewhere in this Annual Report, including those set forth in the sections titled "Cautionary Note Regarding Forward-Looking Statements" and Part I, Item 1A."Risk Factors" in this Annual Report.
General
Harbor Diversified, Inc. ("Harbor") is a non-operating holding company that is the parent of a consolidated group of subsidiaries, including AWAC Aviation, Inc. ("AWAC"), which, until January 9, 2026, was the sole member of Air Wisconsin Airlines LLC ("Air Wisconsin"), which operated as an air carrier. Harbor is also the direct parent of three other subsidiaries: (1) Lotus Aviation Leasing, LLC ("Lotus"), which leased flight equipment to Air Wisconsin, (2) Air Wisconsin Funding LLC ("AWF"), which provided flight equipment financing to Air Wisconsin, and (3) Harbor Therapeutics, Inc. ("Therapeutics"), which is a non-operating entity with no material assets.
Following the Aviation Disposition (as defined below), neither Harbor nor any of its remaining subsidiaries has any material operating assets or active airline operations. Our remaining assets consist primarily of cash and cash equivalents, restricted cash and marketable securities (collectively, the "Liquid Assets"). We have a significant amount of Liquid Assets with no material indebtedness.
Because Harbor consolidated Air Wisconsin for financial statement purposes prior to the Aviation Disposition, for purposes of this Annual Report, disclosures relating to activities of Air Wisconsin also apply to Harbor, unless otherwise noted. Where reference is made only to Harbor Diversified, Inc. (such as when referring to the outstanding shares of common stock), it is referred to as "Harbor." Where reference is made only to Air Wisconsin (such as where it is named specifically for its historical contractual obligations and operations), it is referred to as "Air Wisconsin." Where reference is intended to include Harbor and its consolidated subsidiaries, they are jointly referred to as the "Company," "we," "us," or "our."
Unless otherwise indicated, the discussion below reflects our historical financial condition and results of operations for the year ended December 31, 2025, during which Air Wisconsin conducted airline operations under the American capacity purchase agreement (as defined below) through its termination in April 2025 and limited charter operations through the Aviation Disposition (as defined below). Our business operations and financial condition following the Aviation Disposition are materially different from our historical operations and financial condition reflected in the periods presented in this Annual Report, and such historical results should not be viewed as indicative of future performance.
Business Overview and Recent Developments
Aviation Disposition
As previously disclosed, on January 9, 2026, Harbor completed the last in a series of transactions pursuant to which it disposed of all of its aviation assets, including its membership interests in Air Wisconsin (the completion of all such transactions, collectively, the "Aviation Disposition"). The aggregate consideration received in connection with the Aviation Disposition was approximately $125.9 million, consisting of $14.8 million for asset dispositions occurring during 2025 and $111.1 million in January 2026, subject to certain customary purchase price adjustments and the impact of required tax obligations which are estimated to be approximately $(0.2) million and $9.9 million, respectively.
After giving effect to the Aviation Disposition, neither Harbor nor any of its remaining subsidiaries has any material operating assets or infrastructure to support an airline, provided that the Company did retain certain non-operating assets, which primarily relate to lease payments for a single aircraft, insurance claims, and state and federal tax refunds.
The Company currently does not have any material operating assets, is not engaged in any operating business, and does not have any source of revenue from operations.
Historical Regional Airline Services and Supplemental Operations
Prior to the termination of the capacity purchase agreement entered into with American Airlines, Inc. ("American") in August 2022 (the "American capacity purchase agreement"), our primary business strategy consisted of providing regional airline services under capacity purchase agreements with major airlines and certain other supplemental operations including charter flights. As of December 31, 2025, Air Wisconsin owned a fleet of 54 CRJ-200 regional jets, all of which were manufactured by Bombardier, Inc. Following the Aviation Disposition, the Company has no material operating assets.
Charter Flight Services
In the fourth quarter of 2024, Air Wisconsin began offering on-demand charter service within the contiguous United States. This service was seasonal in nature with a significant portion of charter flights provided to collegiate athletic teams, whose seasons typically end late spring or early summer and do not resume until fall. Although Air Wisconsin significantly increased its charter flying in the first half of 2025 due to the wind-down and termination of the American capacity purchase agreement, it became increasingly difficult to commit to a significant amount of charter flying in the second half of 2025 due to the evaluation of competing strategic alternatives.
Under this service, Air Wisconsin negotiated a fare for the charter operations with the customer where such fare was calculated based on anticipated costs, including fuel and oil, landing fees, passenger screening fees, etc. As many of such costs were estimated, contracts included reconciliation language; however, under some circumstances such costs were borne by Air Wisconsin. The performance obligation was met and revenue was recognized upon completion of the flight. There were no credit losses recorded with respect to the charter services during the years ended December 31, 2025 and December 31, 2024, nor did the Company expect any such credit losses in the future since the expected revenues were provided in an escrow account prior to any such flights.
American Capacity Purchase Agreement
In August 2022, Air Wisconsin entered into the American capacity purchase agreement, pursuant to which Air Wisconsin agreed to provide regional airline services for American. Air Wisconsin commenced flying operations for American in March 2023. On January 3, 2025, in accordance with the American capacity purchase agreement, American delivered to Air Wisconsin notice of termination of the agreement, effective April 3, 2025. On that date, all remaining Air Wisconsin aircraft covered by that agreement were withdrawn from service under the agreement.
Under the American capacity purchase agreement, Air Wisconsin was entitled to receive certain payments based on the number of aircraft covered under the agreement, block hours, departures and certain performance metrics. Air Wisconsin was also eligible to receive bonus compensation, and was required to pay rebates, upon the achievement of, or failure to achieve, certain pre-established performance criteria.
Air Wisconsin was responsible for certain customary costs relating to the flight operation and maintenance of the covered aircraft along with other customary controllable expenses, including expenses associated with flight crews, line maintenance and overhead. American reimbursed Air Wisconsin for certain customary costs and expenses incurred in connection with Air Wisconsin's flight operations, including fuel, landing and air traffic control, changes to livery and branding, aircraft and passenger liability insurance, property taxes and systems support. American had the right to schedule all aircraft covered by the agreement, including determining route selection and frequency, and the timing of scheduled arrivals and departures, in each case subject to certain scheduling parameters. American also had the right to determine and publish fares and to establish seat inventories, overbooking levels, and allocation of seats among fare categories. American provided all ground handling services, including gate and ticket counter services, baggage handling, cargo handling, aircraft loading/unloading services, passenger ticketing, and aircraft cabin cleaning. American had the right to all revenues resulting from the sale of passenger tickets associated with the covered aircraft and all other sources of revenue associated with the operation of the covered aircraft, including revenues relating to baggage charges, food and beverage sales and ticket change fees. The American capacity purchase agreement protected Air Wisconsin, to an extent, from many of the elements that typically cause volatility in airline financial performance, including fuel prices, variations in ticket prices, and fluctuations in the number of passengers.
For additional information, please refer to the sections titled "American Capacity Purchase Agreement" in Part I, Item 1, Business, and Part I, Item 1A, Risk Factors, in this Annual Report, and Note 1, Summary of Significant Accounting Policies - Contract Revenues, Note 2, Capacity Purchase Agreement with American, and Note 15, Subsequent Events, in the notes to the audited consolidated financial statements in this Annual Report.
Federal and State Tax Refunds
Prior to its termination, a dispute arose under the capacity purchase agreement Air Wisconsin had entered into with United Airlines, Inc. in 2017, which dispute was resolved by arbitration and the issuance of a decision and award in February 2024 (the "United Arbitration Award"). We determined that, as a result of the United Arbitration Award, we would amend our 2021 and 2022 federal and state income tax returns to recover federal and state income taxes previously paid related to the disputed amounts. As a result, we recorded federal and state tax receivables of approximately $7.4 million in the aggregate related to the amendment of our 2021 and 2022 federal and state income tax returns. As of December 31, 2025, we had yet to receive $6.7 million related to the 2022 and 2021 amended tax returns and have also recorded a long-term interest receivable in the amount of $0.9 million related to the 2022 amended federal income tax return. The decrease in revenues and interest income also resulted in federal and state net operating losses as of December 31, 2022 and much of these losses remain available as of December 31, 2025, although the Company expects to fully utilize the federal net operating losses and a portion of the state net operating losses as a result of the Aviation Disposition. While we established valuation allowances against our deferred tax assets beginning with the year ended December 31, 2022 and continuing through the year ended December 31, 2024, as a result of the Aviation Disposition we reversed, in full, the valuation allowances against our federal deferred tax assets that were ordinary in nature as well as a portion of our valuation allowances against state deferred tax assets as of December 31, 2025. For additional information, please refer to Note 3, Income Taxes, in the notes to the audited consolidated financial statements in this Annual Report.
As of the date of this Annual Report, we continue to pursue collection of the anticipated federal and state income tax refunds described above. However, the timing and receipt of such funds remains subject to review by the applicable taxing authorities.
Alternative Business Strategies
Given the dynamics in the airline industry, including the decision by multiple major airlines to eliminate from their fleets single class 50-seat aircraft, such as those owned by Air Wisconsin, the Company realized that it was unlikely Air Wisconsin would be able to enter into a new capacity purchase agreement with a major airline to provide regional airline service. As a result, on January 10, 2025, Air Wisconsin announced a strategic realignment of its business strategies. As part of that contemplated realignment, Air Wisconsin began exploring various business opportunities, including (1) expanding its charter operations; (2) focusing on Essential Air Service Program markets; and (3) transitioning its prior relationship with American to a codeshare and interline relationship. These efforts did not lead to sustainable operations or positive financial results.
In the second and third quarters of 2025, Air Wisconsin began exploring other strategic alternatives, including the sale of its business or of substantially all of its assets, either in one transaction or a series of multiple transactions. Management had discussions with several different parties and considered various proposals from interested parties, some of which were interested in acquiring Air Wisconsin's U.S. Department of Transportation (the "DOT") operating certificate and others of which were interested in acquiring some of Air Wisconsin's aircraft, engines or other assets. The primary factors Air Wisconsin considered in analyzing various proposals included anticipated deal consideration, legal structure, expected tax implications, regulatory timing and impacts, and certainty of closing. The strategic review process culminated in the Aviation Disposition.
Following the Aviation Disposition, we are evaluating potential strategic alternatives that may include investments in, or acquisitions of, one or more businesses, assets, technologies, joint ventures, or other strategic opportunities. Any such transactions could involve one or multiple investments or acquisitions, be in any number of industries or lines of business and involve the use of cash, equity securities, or a combination thereof. In addition, we may pursue other strategic alternatives, which could include, without limitation, the issuance of one or more cash dividends, share repurchases, tender offers, registration as an investment company, a liquidation, or other potential transactions. Until a strategic alternative is identified and completed, if at all, we expect our business to remain focused primarily on investment management, capital preservation, liquidity and the evaluation of potential opportunities.
Additionally, since our remaining assets are predominantly comprised Liquid Assets, we could potentially be deemed an "investment company" pursuant to the Investment Company Act of 1940, as amended, and the rules promulgated
thereunder (the "Investment Company Act"). Becoming an investment company would impose on us additional regulatory and disclosure requirements, compliance with which could be expensive and time-consuming. The Investment Company Act provides a number of exemptions, including a one-year safe harbor for companies that are seeking to acquire an operating business. We are availing ourselves of this exemption. If we are not able to meet the requirements of the exemption, we may be required to seek the availability of a different exemption, register as an investment company, or pursue an alternative strategy.
Dependence on Investment Income
Following the Aviation Disposition, our primary assets consist of Liquid Assets. Consistent with our investment policies, those assets are primarily invested in deposit accounts, money market funds, government-backed securities, and similar investments, with the primary objectives of maintaining liquidity and preserving principal. Since we are no longer engaged in any operating business, and do not have any source of revenue from operations, our primary source of earnings for the foreseeable future is expected to be investment income generated from those assets. Accordingly, our future results of operations and cash flows are expected to be materially influenced by factors such as prevailing interest rates, the credit quality of counterparties, the composition and maturity of our investment portfolio, and broader macroeconomic conditions. Further, our investment returns must be sufficient to offset our ongoing corporate expenses, including costs associated with maintaining our public company status, pursuing strategic alternatives, and compensating our management team. To the extent our operating expenses exceed investment income over an extended period, our assets would decline, reducing the capital available for strategic transactions or other strategic opportunities.
Reduction in Force
On January 10, 2025, Air Wisconsin announced the strategic transition of its operations following the termination of the American capacity purchase agreement. In connection with that transition, Air Wisconsin implemented a workforce reduction plan to re-balance its workforce to better align with that transition. On January 30, 2025, Air Wisconsin issued notices to all employees pursuant to the Worker Adjustment and Retraining Notification Act ("WARN"). On March 14, 2025, Air Wisconsin notified approximately 240 employees, consisting of 123 management employees, 100 pilots, and 13 dispatchers, that they would be furloughed or terminated effective March 31, 2025, or within a short period of time thereafter. On April 10, 2025, Air Wisconsin announced additional workforce reductions that affected approximately 400 additional employees that became effective on June 9, 2025, or a short period of time thereafter, and included the furlough of certain unionized employees. On August 29, 2025, Air Wisconsin issued new notices to all employees pursuant to WARN. No further workforce reductions were made pursuant to WARN and the notice period expired on December 31, 2025.
Resignation and Appointment of Chief Financial Officer
As previously disclosed, Liam Mackay resigned from his position as Air Wisconsin's Chief Financial Officer, effective September 5, 2025. On September 1, 2025, Gregg Garvey was appointed to serve as Air Wisconsin's Senior Vice President, Chief Financial Officer, and Treasurer, effective immediately.
2025 Financial Highlights
The following financial highlights relate solely to our historical performance inclusive of our airline operations for the year ended December 31, 2025, and do not reflect our financial position following the Aviation Disposition on January 9, 2026.
For the year ended December 31, 2025, we had total operating revenues of $66.7 million, a 67.1% decrease, compared to $202.4 million for the year ended December 31, 2024. Net income for the year ended December 31, 2025 was $0.03 million, or net income of $0.00 per basic and diluted share, compared to net loss of $17.2 million, or net loss of $(0.36) per basic and diluted share, for the year ended December 31, 2024. For additional information, please refer to Note 11, Income (Loss) per Share and Equity, in the notes to the audited consolidated financial statements in this Annual Report.
American Capacity Purchase Agreement Revenues
In March 2023, Air Wisconsin commenced flying operations for American under the American capacity purchase agreement, at which time Air Wisconsin began recording contract revenues under that agreement. Contract revenues could take the form of fixed or variable receipts as further described below. Amounts Air Wisconsin received for completing its performance obligation in a particular period have been recorded as contract revenues in that period and were, prior to
Amendment No. 4 to the American capacity purchase agreement, generally variable in nature, such as revenues based on departures and block hours or the number of aircraft for which it received compensation on a daily basis. Other amounts received have been recognized in contract revenues in proportion to the number of flights actually completed in the period relative to the number of flights that were expected to be completed in subsequent periods during the remaining term of the agreement. The American capacity purchase agreement also provided for the reimbursement to Air Wisconsin of certain direct operating expenses, such as certain insurance premiums and property taxes.
Because our flights under the American capacity purchase agreement provided distinct services that had the same pattern of transfer to the customer, which were satisfied over time with the measure of progress for each flight deemed to be substantially the same, the flight services provided under the agreement represented a series of services that were accounted for as a single performance obligation. Therefore, our contract revenues were recognized when service was provided, and our performance obligation was met on a per completed flight basis. The performance obligation of each completed flight was measured using departures.
Prior to its termination in April 2025, the American capacity purchase agreement provided for provisional cash payments each month based on a projected level of flying each month. Air Wisconsin subsequently reconciled these payments to the actual completed flight activity on a monthly basis. Flight operations began for American in March 2023 and ceased in April 2025, and all payments were subsequently reconciled to the actual completed flight activity.
Charter Service Revenues
Under the on-demand charter service, Air Wisconsin negotiated a fare for the charter operations with the customer where such fare was calculated based on anticipated costs, including fuel and oil, landing fees, and passenger screening fees. As most of such costs were estimated, contracts included reconciliation language; however, under some circumstances such costs were borne by Air Wisconsin. With the wind-down of the American capacity purchase agreement commencing in the first quarter of 2025, Air Wisconsin increased its availability for its charter flights operations, although such operations were reduced in the second half of 2025 due to competing strategic alternatives.
Contract Services and Other Revenues
Contract services and other revenue are not material and primarily consisted of maintenance services on two aircraft that were sold during 2025, aircraft rental revenue, and the sale of parts.
For additional information, please refer to the section titled "Critical Accounting Policies and Estimates - Revenue Recognition," in Note 1, Summary of Significant Accounting Policies - Contract Revenues, and Note 2, Capacity Purchase Agreement with American in the notes to the audited consolidated financial statements in this Annual Report.
Operating Expenses
Our total operating expenses decreased $145.2 million, or 64.1%, for the year ended December 31, 2025 compared to the year ended December 31, 2024. The decrease in operating expenses was primarily related to the reduction in flying as a result of the termination of the American capacity purchase agreement on April 3, 2025. While the termination of the American capacity purchase agreement resulted in a significant reduction in expenses, during the remainder of 2025, the Company continued to incur a reduced level of operating expenses as it continued to maintain the infrastructure necessary to maintain a regional airline, while evaluating strategic alternatives. For additional information, please refer to the section titled "-Results of Operations-Operating Expenses" in this Annual Report.
Economic Conditions, Challenges and Risks Impacting Financial Results
Although the American capacity purchase agreement tended to have the effect of reducing Air Wisconsin's exposure to certain risks and uncertainties, its operating and business performance during the years ended December 31, 2025 and December 31, 2024 were driven by various factors that typically affect regional airlines and the markets in which they operate, including factors that affect the broader airline and travel industries. The following key factors have historically materially affected operating performance and financial results. Following the termination of the American capacity purchase agreement in April 2025 and finally the Aviation Disposition on January 9, 2026, these factors are no longer directly relevant to our business, except and only to the extent that these factors affected Air Wisconsin's charter operations, which the Company determined to be immaterial.
Pilot Shortage. Air Wisconsin historically faced an industry-wide pilot shortage, which is the result of a number of factors, including personnel seeking opportunities with larger airlines where compensation may be substantially higher, the
number of pilots at major airlines reaching retirement age, upward pressure on wages and bonuses at regional and other carriers and within other industries, and the proliferation of cargo and low-cost carriers that have increased demand for pilots. This limited the number of flights Air Wisconsin could fly under the American capacity purchase agreement. Following the wind down and termination of the American capacity purchase agreement and subsequent reductions in force, Air Wisconsin had difficulty retaining pilots needed for its alternative business strategies.
Industry Volatility. The airline industry has historically been volatile and affected by numerous factors, such as tourist activity, consumer confidence, discretionary spending, fare initiatives, fuel prices, labor costs, labor actions, global pandemics, outbreak of war or hostilities, changes in governmental regulations, government sanctions, natural disasters, and changes in weather patterns. Historically, Air Wisconsin's capacity purchase agreements sheltered it from some of these factors; however, because we no longer operate an airline, we are no longer directly exposed to these industry-specific risks.
Competition. Air Wisconsin historically operated as a regional airline and faced competition from larger carriers with greater financial and operational resources, which contributed to the difficulties Air Wisconsin faced in seeking to enter into these markets. Following the Aviation Disposition, these competitive dynamics are no longer relevant to us.
Maintenance Contracts, Costs and Timing. Historically, Air Wisconsin's results were affected by aircraft maintenance costs and the timing of major maintenance activities, which were subject to variables such as aircraft utilization, regulatory requirements, and unscheduled maintenance events. Air Wisconsin's employees performed routine airframe and engine maintenance along with periodic inspections of equipment at its maintenance facilities. Air Wisconsin also used third-party vendors for certain heavy airframe and engine maintenance work, along with parts procurement and component overhaul services for Air Wisconsin's aircraft. Since the maintenance program remained with Air Wisconsin, we no longer incur aircraft maintenance expenses following the Aviation Disposition.
Unionized Labor. The airline industry is heavily unionized, and the wages, benefits and work rules of unionized airline industry employees are determined by collective bargaining agreements. As of December 31, 2025, Air Wisconsin had approximately 233 employees, of which 139 were represented by unions. Because the unionized workforce and related labor agreements remained with Air Wisconsin following the Aviation Disposition, labor relations and collective bargaining agreements are no longer relevant to the Company.
Please refer to Part I, Item 1A, Risk Factors, in this Annual Report for a discussion of the significant risks and uncertainties affecting our business and results of operations, and the trading price of Harbor's common stock.
Components of Our Results of Operations
The following discussion summarizes the key components of our consolidated statements of operations and reflects Air Wisconsin's airline operations prior to the Aviation Disposition. Following the Aviation Disposition, the airline-specific operating components are no longer directly relevant.
Operating Revenues
Our consolidated operating revenues consisted primarily of contract revenues from flight services for the year ended December 31, 2025.
Contract Revenues. Contract revenues during the twelve months ended December 31, 2025, and December 31, 2024, consisted of fixed monthly amounts per aircraft pursuant to the American capacity purchase agreement, along with the additional amounts received based on incentives and the number of departures and block hours flown. The number of aircraft we had in scheduled service and the number of block hours and departures we generated from our flights were the primary drivers of our contract revenues under the American capacity purchase agreement. As a result of the wind-down and termination of the American capacity purchase agreement, block hours decreased from 74,742 during the year ended December 31, 2024 to 16,756 during the year ended December 31, 2025, or by 77.6%, and departures decreased from 54,001 in 2024 to 11,864 in 2025, or by 78.0%.
Although a decrease in block hours and departures during the year ended December 31, 2025, compared to the year ended December 31, 2024, resulted in a decrease in variable revenues for the year ended December 31, 2025, compared to the year ended December 31, 2024, the decrease was offset by increased revenues in the first part of 2025 as a result of Amendment No. 4 ("Amendment No. 4") to the American capacity purchase agreement. Amendment No. 4, executed in November 2024, increased fixed and incentive revenues available to Air Wisconsin, and shortened the period over which any remaining deferred revenues would be recognized due to the termination of the American capacity purchase agreement
in April 2025. However, primarily as a result of the termination of the agreement on April 3, 2025, overall contract revenues from American decreased by $145.7 million, or 72.8%, to $54.5 million for the year ended December 31, 2025 compared to $200.2 million for the year ended December 31, 2024. Total contract revenues for the year ended December 31, 2025 included $4.2 million of contract revenues that were previously deferred under the American capacity purchase agreement, compared to $2.9 million of contract revenues recognized during the year ended December 31, 2024. Upon the termination of the American capacity purchase agreement on April 3, 2025, Air Wisconsin no longer had any aircraft in service for American.
As of December 31, 2025, the Company had no Contract liabilities, net on its consolidated balance sheets compared to Contract liabilities, net of $4.2 million as of December 31, 2024.
In the fourth quarter of 2024, Air Wisconsin began to offer on-demand charter services, which expanded in the first and second quarters of 2025. Although revenues from charter flights increased during the year ended December 31, 2025, it was not sufficient to offset the loss of revenue from the American capacity purchase agreement when compared to the year ended December 31, 2024. Charter services are seasonal in nature and most of Air Wisconsin's charter services were performed for collegiate athletic teams. For the year ended December 31, 2025, charter services revenues increased $9.6 million to $11.8 million, compared to $2.2 million for the year ended December 31, 2024, or 437.6%. Charter service revenues are recorded as part of Contract revenues in the consolidated statements of operations. For the year ended December 31, 2025 and December 31, 2024, charter revenues were 17.6% and 1.1%, respectively, of total operating revenues.
Contract Services and Other. During the year ended December 31, 2025, Air Wisconsin performed maintenance services on two aircraft that were sold in 2025. This service revenue was$0.4 million compared to no service revenue during the year ended December 31, 2024. Other revenues were immaterial and primarily consisted of aircraft rental revenue and the sales of parts to other airlines. These parts were sold at fair market value.
Operating Expenses
Our consolidated operating expenses consisted of the following items:
Payroll and Related Costs. Payroll and related costs primarily relate to wages, benefits and payroll taxes for all of Air Wisconsin's employees, as well as costs related to lodging of our flight crews and crew training expenses.
Aircraft Fuel and Oil. Substantially all aircraft fuel and related fueling costs for flying under the American capacity purchase agreement were directly paid and supplied by American, and we did not record any revenue or expense for such fuel. We were responsible for the cost of aircraft oil under the American capacity purchase agreement, although that expense was not material. Following the termination of the American capacity purchase agreement in April 2025, all expenses for aircraft fuel, related fuel costs, and oil were borne by Air Wisconsin, provided that any such costs in support of Air Wisconsin's charter operations were included in estimated and reconciled costs paid by the charters.
Aircraft Maintenance, Materials and Repairs. Aircraft maintenance, materials and repairs include costs related to airframe and rotable overhauls, normal recurring maintenance and the cost of aircraft materials and parts related to Air Wisconsin's CRJ-200 regional jets and the cost of engine maintenance by Lotus. With the exception of engine overhauls by Air Wisconsin, we recorded these costs using the direct expense method of accounting, pursuant to which component repair work was expensed when parts were shipped for repair, while airframe and engine overhauls were expensed when the maintenance work was completed. As a result of using the direct expense method, the timing of maintenance expense reflected in the financial statements may vary from period to period. We capitalized Air Wisconsin's engine overhaul costs, and the amortization expense is included in aircraft maintenance, materials and repairs using the deferral method of accounting; Air Wisconsin's engine overhaul costs were amortized over the estimated useful life of the overhaul measured in engine cycles remaining until the next scheduled shop visit.
Other Rents. Other rents include expenses related to leased engines, costs related to leased flight simulators used to train Air Wisconsin's pilots, and building rents such as crew and maintenance bases and corporate office space.
Depreciation, Amortization and Obsolescence. Depreciation expense is a periodic non-cash charge primarily related to aircraft, engine and rotable parts depreciation. Amortization expense is a periodic non-cash charge primarily related to capitalized engine overhauls. Obsolescence expense is a periodic non-cash charge primarily related to the provision for obsolescence of our expendable aircraft parts.
Gain on Disposal of Fixed Assets. Gain on disposal of fixed assets records the difference between the selling price of fixed assets and their basis for financial statement purposes. During 2025 the Company sold several aircraft and engines, along with other miscellaneous rotable parts, as it evaluated strategic alternatives after the termination of the American capacity purchase agreement. Gains recognized in 2024 were reclassified from Purchased Services and Other for comparability purposes.
Purchased Services and Other. Purchased services and other expense primarily includes information technology system costs, legal fees, professional and technical fees, insurance premiums, property taxes and other administrative expenses. The majority of insurance premiums and property taxes were pass-through costs to American prior to the termination of the American capacity purchase agreement.
Other (Expense) Income, Net
Interest and Dividend Income. Interest and dividend income primarily includes interest and dividends earned on our Liquid Assets. During the year ended December 31, 2025 the Company also recorded interest income on its long-term federal tax receivable resulting from the amendment of its 2022 federal income tax return.
Interest Expense. Interest expense in the year ended December 31, 2025 was immaterial.
Gain (Loss) on Marketable Securities, Short-term Restricted Investments (SESP), and Long-term Restricted Investments (SESP). The gain or loss reflects the change in the market value of our Marketable securities, Short-term restricted investments (SESP), and Long-term restricted investments (SESP) and any gains or losses associated with their sales for the year ended December 31, 2025. For the year ended December 31, 2025, the Company recorded a gain on its Marketable securities of $2.0 million and a gain of $0.5 million on its Short-term restricted investments (SESP), and Long-term restricted investments (SESP) that are contained within the Supplemental Executive Savings Plan. The combined gain of $2.5 million is recorded as Gain on marketable securities, short-term restricted investments (SESP), and long-term restricted investments (SESP) in the consolidated statements of operations. For the year ended December 31, 2024, the Company recorded a gain on its Marketable securities and Long-term restricted investments (SESP) of $1.6 million, of which $0.6 million related to the Company's Long-term restricted investments (SESP). For additional information, please refer to Note 8, Retirement and Other Benefit Plans, in the notes to the audited consolidated financial statements in this Annual Report.
Other, Net. Other expenses include income (expense) derived from activities not classified in any other area of the consolidated statements of operations.
Segment Reporting
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker ("CODM"), who for the year ended December 31, 2025, was the President and Chief Executive Officer of Air Wisconsin, in deciding how to allocate resources and in assessing operating performance. Under Accounting Standards Codification Topic 280, Segment Reporting, for the year ended December 31, 2025, the Company has one reportable segment that is managed on a consolidated basis providing on-demand charter service and scheduled flight services for American under the American capacity purchase agreement, all within the contiguous United States and Canada.
Our CODM regularly evaluates the Company's consolidated net income (loss) to make decisions regarding resource allocation and performance assessment. Significant expenses that are regularly provided to the CODM for the Company's one reportable segment align with those presented on the consolidated statements of operations and are included within the reported measure of consolidated Net loss. Additionally, the measure of segment assets is reported on the consolidated balance sheets as Total assets.
Results of Operations
The following discussion reflects Air Wisconsin's airline operations prior to the Aviation Disposition. Our business operations and financial condition following the Aviation Disposition are materially different from our historical business operations and financial condition, and historical results should not be viewed as indicative of future performance.
Comparison of the Years Ended December 31, 2025 and December 31, 2024
We had an operating loss of $14.7 million for the year ended December 31, 2025, compared to an operating loss of $24.2 million for the year ended December 31, 2024. For the year ended December 31, 2025, we had a net income of $0.03 million compared to a net loss of $17.2 million for the year ended December 31, 2024.
The following table sets forth our major operational statistics and the associated percentage changes for the periods presented:
|
Year Ended December 31, |
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| 2025 | 2024 | Change | |||||||||||||||||||||
| Operating Data: | |||||||||||||||||||||||
| Available Seat Miles ("ASMs") (in thousands) | 144,946 | 732,446 | (587,500) | (80.2 | %) | ||||||||||||||||||
| Actual Block Hours | 16,756 | 74,742 | (57,986) | (77.6 | %) | ||||||||||||||||||
| Actual Departures | 11,864 | 54,001 | (42,137) | (78.0 | %) | ||||||||||||||||||
| Revenue Passenger Miles ("RPMs") (in thousands) | 112,178 | 607,135 | (494,957) | (81.5 | %) | ||||||||||||||||||
| Average Stage Length (in miles) | 264 | 278 | (14) | (5.0 | %) | ||||||||||||||||||
| Contract Revenue Per Available Seat Mile (in cents) | 45.69¢ | 27.63¢ | 18.06 | ¢ | 65.4 | % | |||||||||||||||||
| Passengers | 417,911 | 2,154,829 | (1,736,918) | (80.6 | %) | ||||||||||||||||||
The decrease in ASMs, block hours, departures, passengers and RPMs during the year ended December 31, 2025, compared to the year ended December 31, 2024, was primarily due to the termination of operations under the American capacity purchase agreement on April 3, 2025, and limited seasonal charter service opportunities. The average stage length decreased for the year ended December 31, 2025 because, although charter flights generally served longer routes than the regional routes flown under the American capacity purchase agreement, the number of charter flights flown in 2025 were significantly fewer than those flown under the American capacity purchase agreement. During the year ended December 31, 2025, the increase in contract revenue per available seat mile was primarily the result of higher contract rates under the American capacity purchase agreement as a result of Amendment No. 4, combined with higher contract rates related to charter operations, when compared to the year ended December 31, 2024.
Operating Revenues
The following table sets forth our operating revenues and the associated dollar and percentage changes for the periods presented:
|
Year Ended December 31, |
|||||||||||||||||||||||
| 2025 | 2024 | Change | |||||||||||||||||||||
| Operating Revenues ($ in thousands): | |||||||||||||||||||||||
| Contract Revenues | $ | 66,227 | $ | 202,375 | $ | (136,148) | (67.3 | %) | |||||||||||||||
| Contract Services and Other | 450 | 8 | 442 | 5525.0 | % | ||||||||||||||||||
| Total Operating Revenues | $ | 66,677 | $ | 202,383 | $ | (135,706) | (67.1 | %) | |||||||||||||||
Total operating revenues decreased $135.7 million, or 67.1% during the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily due to the wind down and termination of the American capacity purchase agreement. For additional information, please refer to Note 1, Summary of Significant Accounting Policies, in the notes to the audited consolidated financial statements in this Annual Report.
Operating Expenses
The following table sets forth our operating expenses and the associated dollar and percentage changes for the periods presented:
|
Year Ended December 31, |
|||||||||||||||||||||||
| 2025 | 2024 | Change | |||||||||||||||||||||
| Operating Expenses ($ in thousands): | |||||||||||||||||||||||
| Payroll and Related Costs | $ | 54,636 | $ | 122,102 | $ | (67,466) | (55.3 | %) | |||||||||||||||
| Aircraft Fuel and Oil | 1,064 | 340 | 724 | 212.9 | % | ||||||||||||||||||
| Aircraft Maintenance, Materials and Repairs | 14,241 | 58,476 | (44,235) | (75.6 | %) | ||||||||||||||||||
| Other Rents | 3,259 | 6,698 | (3,439) | (51.3 | %) | ||||||||||||||||||
| Depreciation, Amortization and Obsolescence | 8,916 | 26,051 | (17,135) | (65.8 | %) | ||||||||||||||||||
| Gain on disposal of fixed assets | (14,937) | (648) | (14,289) | 2205.1 | % | ||||||||||||||||||
| Purchased Services and Other | 14,247 | 13,567 | 680 | 5.0 | % | ||||||||||||||||||
| Total Operating Expenses | $ | 81,426 | $ | 226,586 | $ | (145,160) | (64.1 | %) | |||||||||||||||
Our total operating expenses consist of the following items:
Payroll and Related Costs. Payroll and related costs decreased $67.5 million, or 55.3%, to $54.6 million for the year ended December 31, 2025, compared to the year ended December 31, 2024. The termination of the American capacity purchase agreement led to much lower flying levels resulting in decreases to pilot wages of $30.2 million, employee benefits of $6.3 million, maintenance wages of $6.0 million, non-operational and other union pay of $5.0 million, payroll taxes of $3.8 million, management wages of $7.0 million, crew rooms and transportation of $3.1 million, flight attendant wages of $1.9 million, per diem and meals expenses of $1.6 million, personnel expense of $1.6 million and dispatch wages of $0.9 million.
Aircraft Fuel and Oil. Aircraft fuel and oil costs increased $0.7 million, or 212.9%, to $1.1 million for the year ended December 31, 2025, compared to the year ended December 31, 2024. Substantially all of the fuel costs incurred as a result of flying pursuant to the American capacity purchase agreement during the years ended December 31, 2025 and December 31, 2024 were directly paid to suppliers by American. Following the termination of the American capacity purchase agreement in April 2025, all aircraft fuel, related fuel costs, and oil costs were borne by Air Wisconsin, provided that any such costs in support of Air Wisconsin's charter operations were included in estimated and reconciled costs paid by the charters. As a result, the increase in aircraft fuel and oil was primarily driven by an increase in fuel costs and related taxes of $0.8 million, offset by a decrease in oil costs of $0.1 million.
Aircraft Maintenance, Materials and Repairs. Aircraft maintenance, materials and repairs costs decreased $44.2 million, or 75.6%, to $14.2 million for the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily due to reduced flying levels as a result of the termination of the American capacity purchase agreement on April 3, 2025. The decrease was primarily driven by decreases in airframe repairs of $30.3 million, airframe materials of $7.5 million, net scraps of $2.3 million, overhaul amortization of $2.2 million, freight expense of $0.9 million, engine repairs of $0.6 million, shop supplies of $0.2 million, and tools expense of $0.1 million.
Other Rents. Other rents expense decreased $3.4 million, or 51.3%, to $3.3 million for the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily as a result of decreases in flight simulator rent of $3.0 million, and facilities rent of $0.4 million.
Depreciation, Amortization and Obsolescence. Depreciation, amortization and obsolescence expense decreased $17.1 million, or 65.8%, to $8.9 million for the year ended December 31, 2025, compared to the year ended December 31, 2024. This was primarily due to decreases in depreciation expense for flight equipment of $16.5 million attributable to many of the aircraft reaching their salvage values along with the sale of some aircraft during 2025, lower depreciation on other equipment of $0.2 million and lower amortization expense of $0.4 million.
Gain on Disposal of Fixed Assets. Gain on disposal of fixed assets increased $14.3 million, or 2,205.1%, to $14.9 million for the year ended December 31, 2025, compared to the year ended December 31, 2024. This increase was primarily due to the sale of six aircraft that resulted in a gain of $11.2 million, the sale of four engines resulting in a gain of $2.2 million, and the sale of miscellaneous rotable parts resulting in a gain of $0.9 million when compared to the year ended December 31, 2024 when there was only the sale of miscellaneous rotable parts.
Purchased Services and Other. Purchased services and other expense increased $0.7 million, or 5.0%, to $14.2 million for the year ended December 31, 2025, compared to the year ended December 31, 2024. The increase was primarily due to increases of $0.6 million in professional and technical fees, $0.4 million in ground handling expenses related to charter services, $0.3 million related to increases in our reserves for expected credit losses, and $0.3 million in parking costs related to inactive aircraft. These increases were partially offset by decreases in hull and liability insurance of $0.5 million, miscellaneous supplies of $0.2 million, data communication of $0.1 million, and employment advertising of $0.1 million.
Other (Expense) Income
Interest and Dividend Income. Interest and dividend income increased $1.3 million for the year ended December 31, 2025, compared to the year ended December 31, 2024. The increase was primarily due to an increase in investment income earned on our Liquid Assets and the recording of interest income in the amount of $0.9 million related to the 2022 long-term federal tax receivable resulting from the amendment of the 2022 federal tax return.
Interest Expense. Interest expense was immaterial and remained relatively unchanged for the year ended December 31, 2025, compared to the year ended December 31, 2024.
Gain on Marketable Securities, Short-term Restricted Investments (SESP), and Long-term Restricted Investments (SESP). Gain on marketable securities, short-term restricted investments (SESP), and long-term restricted investments (SESP) increased $1.0 million for the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily as a result of an increase in the value of our marketable securities.
Other, Net. Other income and expense was immaterial and relatively unchanged for the year ended December 31, 2025, compared to the year ended December 31, 2024.
Net Income (Loss)
Net income for the year ended December 31, 2025 was $0.03 million, or $0.00 per basic and diluted share, compared to net loss of $17.2 million, or $(0.36) per basic share and diluted share, for the year ended December 31, 2024. For additional information, please refer to Note 11, Income (Loss) Per Share and Equity, in the notes to the audited consolidated financial statements in this Annual Report.
The net income for the year ended December 31, 2025, when compared to the net loss for the year ended December 31, 2024, was largely driven by the improved economics of Amendment No. 4 to the American capacity purchase agreement in November 2024. However, as previously disclosed, American notified Air Wisconsin of its intent to terminate the American capacity purchase agreement in January 2025 and the resulting expense that was necessary to maintain the infrastructure of a regional airline as we considered strategic alternatives was offset only by revenue from on-demand charter flights throughout the first half of 2025 and the gains on the sales of aircraft and engines in the second half of 2025 Further, as the result of the Aviation Disposition, the Company also reversed its federal valuation allowances on deferred tax assets and partially reversed its valuation allowances on state deferred tax assets, resulting in an increased income tax benefit of $5.6 million when comparing the year ended December 31, 2025 to the year ended December 31, 2024.
Income Taxes
In the year ended December 31, 2025, our effective tax rate was 100.4%, compared to 6.4% in the year ended December 31, 2024. Our tax rate can vary depending on changes in tax laws, adoption of accounting standards, the amount of income we earn in each state and the state tax rate applicable to such income, as well as any valuation allowance required on our deferred tax assets. The primary driver of the effective tax rate difference between 2025 and 2024 was the reversal of federal valuation allowance against deferred tax assets that were ordinary in nature due to the Aviation Disposition.
We recorded an income tax benefit of $6.8 million and $1.2 million for the years ended December 31, 2025 and December 31, 2024, respectively.
The income tax benefit for the year ended December 31, 2025 resulted in an effective tax rate of 100.4%, which differed from the U.S. federal statutory rate of 21.0%, primarily due to the impact of state income taxes, permanent differences between financial statement and taxable income, and an decrease in the valuation allowances recorded against federal and state deferred tax assets that were ordinary in nature, partially offset by a decrease in valuation allowances recorded against deferred tax assets that are capital in nature. In addition to the state effective tax rate impact, other state impacts include changes in state apportionment and statutory rates.
The income tax provision for the year ended December 31, 2024 resulted in an effective tax rate of 6.4%, which differed from the U.S. federal statutory rate of 21.0%, primarily due to the impact of state income taxes, permanent differences between financial statement and taxable income, and an increase in the valuation allowances recorded against federal and state deferred tax assets that were ordinary in nature, partially offset by a decrease in valuation allowances recorded against deferred tax assets that were capital in nature. In addition to the state effective tax rate impact, other state impacts included changes in state apportionment and statutory rates.
As of December 31, 2025, and December 31, 2024 we had federal net operating loss carryforwards of approximately $47.7 million and $25.5 million, respectively, and state net operating loss carryforwards of approximately $44.6 million and $26.0 million, respectively. The state net operating losses expire beginning in 2032, with some states having either longer expiration periods or none at all.
With the exception of two states requiring the processing of the amended federal return before the filing of the state amended return, the Company has filed amended 2021 and 2022 federal and state income tax returns as a result of the United Arbitration Award and the restatement of the previously issued consolidated financial statements for the year ended December 31, 2022, as well as the interim unaudited condensed consolidated financial statements for the first three quarters of the years ended December 31, 2022 and December 31, 2023. The 2021 amended income tax returns are expected to result in federal and state tax refunds of approximately $0.3 million and $0.1 million, respectively. The 2022 amended income tax returns are expected to result in federal and state tax refunds of approximately $6.5 million and $0.6 million, respectively. During 2025 the Company received the 2021 federal tax refund of $0.3 million. The majority of the anticipated 2021 and 2022 state tax refunds are recorded in Receivables, net in the consolidated balance sheets. Based on recent communication with the IRS regarding the 2022 amended federal tax return, we have reclassified the federal income tax receivable related to the 2022 amended federal tax return in the amount of $6.5 million to a long-term asset as of December 31, 2025. The Company also recorded an interest income receivable of $0.9 million related to the 2022 federal amended tax return refund in Other long-term assets. State tax refunds of $0.3 million related to 2022 state tax returns that cannot be filed without the acceptance of the 2022 federal amended return are also classified as long-term assets. These federal and state amounts are recorded in Other assets in the long-term section in the consolidated balance sheets for the year ended December 31, 2025. The filing of the 2022 federal amended tax return also resulted in a net operating loss carryforward to 2023 of approximately $14.9 million, and various state net operating loss carryforwards to 2023 totaling approximately $14.2 million. Those net operating loss amounts are reflected in the net operating loss amounts noted in the previous paragraph.
For additional information, please refer to Note 3, Income Taxes, in the notes to the audited consolidated financial statements in this Annual Report.
Liquidity and Capital Resources
Historical Operational Performance
During the year ended December 31, 2025, our liquidity was primarily driven by Air Wisconsin's airline operations. Air Wisconsin's departures and block hours in the years ended December 31, 2025 and December 31, 2024 were below pre-COVID-19 levels, initially as a result of the industry-wide pilot shortage and then as a result of the wind down and termination of the American capacity purchase agreement in April 2025. Our operational performance near the end of 2024 was also impacted by Amendment No. 4 to the American capacity purchase agreement which provided for fewer block hours than our crew capabilities. On January 9, 2026, we consummated the Aviation Disposition. As a result, we no longer conduct airline operations and our future liquidity is materially different from the historical operating periods discussed below.
Historical Sources and Uses of Liquidity
Historically, our principal sources of liquidity were our cash and cash equivalents balances, our marketable securities and Air Wisconsin's cash flows from operations. As of December 31, 2025, our Cash and cash equivalents balance was $13.5 million and we held $37.0 million of Marketable securities. This compares to Cash and cash equivalents of $15.0 million and Marketable securities of $97.0 million as of December 31, 2024. As a result of the sale of certain marketable securities on December 31, 2025 and as a result of our policy election to record the sale of the marketable securities based on the trade date, a Due from broker receivable was established in the amount of $49.9 million as of December 31, 2025. This amount was reinvested in marketable securities upon the settlement of the trade in early January 2026.
Restricted Cash
As of December 31, 2025, in addition to our cash and cash equivalents, the Company had $0.6 million in restricted cash, which related to a credit facility used for the issuance of cash collateralized letters of credit supporting Air Wisconsin's obligations under certain lease agreements, airport agreements and insurance policies, as well as cash held for the repurchase of shares under Harbor's stock repurchase program. Restricted cash includes amounts escrowed in an interest-bearing account that secured the credit facility. The obligations supported by these letters of credit remained with Air Wisconsin following the Aviation Disposition.
Historical Operating Expenses and Capital Expenditures
Historically, Air Wisconsin required cash to fund its operating expenses and working capital requirements, which included outlays for capital expenditures, labor, and maintenance costs. During the ordinary course of business, we would evaluate our cash requirements and, if necessary, adjust operating and capital expenditures to reflect changes in labor costs, projected demand for our flying services, required maintenance events and current market conditions. Our capital expenditures were typically used to acquire or maintain aircraft and flight equipment for Air Wisconsin. During the year ended December 31, 2025, we incurred $0.5 million in capital expenditures primarily related to purchases of rotable parts. Because the airline operations and related maintenance programs remained with Air Wisconsin after the Aviation Disposition, we do not anticipate incurring any airline-related operating expenses or capital expenditures going forward.
Aviation Disposition
We received aggregate gross consideration of approximately $125.9 million as a result of the Aviation Disposition, consisting of $14.8 million for asset dispositions occurring during 2025 and $111.1 million in January 2026, subject to certain customary purchase price adjustments and the impact of required tax obligations which the Company has estimated to be approximately $(0.2) million and $9.9 million, respectively. As a result, our primary sources of liquidity now consist of our Liquid Assets, and we no longer generate operating cash flows from airline activities.
Material Cash Requirements
In connection with the Aviation Disposition, we have incurred certain material cash requirements, which we have funded or expect to fund from our Liquid Assets. We estimate that federal and state income taxes resulting from the Aviation Disposition will be approximately $9.9 million, of which $5.5 million had been paid as of the date of this Annual Report, with the remainder expected to be paid in connection with our 2026 estimated tax payments and income tax returns. In addition, in January 2026, upon the closing of the Aviation Disposition, we paid transaction bonuses to certain officers and employees totaling, in the aggregate, approximately $4.3 million. Other than these items and our ongoing
corporate expenses described below, we do not have any material cash requirements from known contractual or other obligations.
Ongoing Liquidity Considerations
After giving effect to the Aviation Disposition, our primary sources of liquidity now consist of our Liquid Assets. Since we are no longer engaged in any operating business, and do not have any source of revenue from operations, our primary source of earnings for the foreseeable future is expected to be investment income generated from the Liquid Assets. Our investment returns must be sufficient to offset our ongoing corporate expenses, including costs associated with maintaining our public company status, pursuing strategic alternatives, and compensating our management team. We believe the Liquid Assets are sufficient to meet our liquidity requirements for at least the next 12 months from the date of this filing.
Our stockholders should be aware that, following the Aviation Disposition, we are not engaged in an operating business and our ability to create stockholder value will depend to a large extent on our ability to generate investment income and our potential execution of strategic alternatives.
For additional information, please refer to Part I, Item 1A, Risk Factors, in this Annual Report.
Cash Flows
The following table presents information regarding our cash flows for each of the periods presented ($ in thousands):
|
Year Ended December 31, |
|||||||||||||||||||||||
| 2025 | 2024 | Change | |||||||||||||||||||||
| Net cash (used in) provided by operating activities | $ | (32,299) | $ | 13,285 | $ | (45,584) | (343.1 | %) | |||||||||||||||
| Net cash provided by (used in) investing activities | $ | 30,833 | $ | (5,339) | $ | 36,172 | 677.5 | % | |||||||||||||||
| Net cash used in financing activities | $ | (46) | $ | (13,858) | $ | 13,812 | 99.7 | % | |||||||||||||||
Net Cash (Used in) Provided by Operating Activities
During the year ended December 31, 2025, net cash used in operating activities was $32.3 million. We had net income during the period of $0.03 million. Net cash flows were further adjusted for increases in cash primarily related to depreciation, amortization and obsolescence of $10.2 million, receivables, net of $4.2 million, sales-lease receivable of $0.6 million, spare parts and supplies of $0.5 million and operating lease right-of-use assets of $0.2 million, which were offset by decreases for gains on the disposition of property of $14.9 million, accounts payable of $9.5 million, deferred income taxes of $6.5 million, contract liabilities of $4.2 million, payments under the supplemental executive savings plan of $3.2 million, accrued payroll and employee benefits of $5.9 million, gains on marketable securities, short-term restricted investments, and long-term restricted investments of $2.0 million, other long-term liabilities of $1.0 million, prepaid expenses and other of $0.4 million, and income taxes payable of $0.3 million.
During the year ended December 31, 2024, net cash provided by operating activities was $13.3 million. We had a net loss during the period of $17.2 million. Net cash flows were further adjusted for increases in cash primarily related to depreciation, amortization and obsolescence of $29.6 million, accounts payable of $2.5 million, contract liabilities of $1.1 million, accrued payroll and employee benefits of $0.9 million, and prepaid expenses and other of $0.6 million, which were offset by decreases for accounts receivable of $1.8 million, deferred income taxes of $1.4 million, gain on Marketable securities and Long-term restricted investments of $1.0 million, gain on the disposition of property of $0.6 million, spare parts and supplies of $0.6 million, and sales-lease receivable of $0.4 million.
Net Cash (Used in) Provided by Investing Activities
During the year ended December 31, 2025, net cash provided by investing activities was $30.8 million, of which approximately $19.6 million was from sales of marketable securities and $16.0 million was from the disposition of
property and equipment, offset by $4.3 million for purchases of marketable securities and $0.5 million for additions to property and equipment.
During the year ended December 31, 2024, net cash used in investing activities was $5.3 million, of which approximately $6.0 million was from sales of marketable securities and $0.8 million was from the disposition of property and equipment, offset by $9.2 million for purchases of marketable securities and $2.9 million for additions to property and equipment.
Net Cash Used in Financing Activities
During the year ended December 31, 2025, net cash used in financing activities was less than $0.1 million, reflecting repurchases of Harbor's common stock.
During the year ended December 31, 2024, net cash used in financing activities was $13.9 million, reflecting $10.7 million for the redemption of Harbor's Series C Convertible Redeemable Preferred Stock (the "Series C Preferred"), $2.1 million for the repurchase of Harbor's common stock and $1.1 million of dividends paid on the Series C Preferred.
Commitments and Contractual Obligations
Operating Leases
As of December 31, 2025, Air Wisconsin had $1.5 million of operating lease obligations primarily related to facilities.
The following table summarizes the future minimum rental payments required under operating leases that had initial or remaining non-cancelable lease terms greater than twelve months as of December 31, 2025:
| Fiscal Year | Amount | |||||||
| 2026 | $ | 727 | ||||||
| 2027 | 315 | |||||||
| 2028 | 148 | |||||||
| 2029 | 79 | |||||||
| 2030 | 60 | |||||||
| Thereafter | 179 | |||||||
| Total lease payments | $ | 1,508 | ||||||
These operating leases remained with Air Wisconsin following the Aviation Disposition and we do not expect to have ongoing airline-related lease commitments. Following the Aviation Disposition, we have a single lease for approximately 1,000 square feet of office space located in Appleton, Wisconsin.
For additional information, please refer to Note 5, Lease Obligations, in the notes to the audited consolidated financial statements in this Annual Report.
Series C Convertible Redeemable Preferred Stock
In January 2020, Harbor issued 4,000,000 shares of the Series C Preferred. The rights, preferences, privileges, qualifications, restrictions and limitations relating to the Series C Preferred are set forth in the Certificate of Designations, Preferences and Rights of Series C Convertible Redeemable Preferred Stock ("Certificate of Designations"), which Harbor filed with the Secretary of State of the State of Delaware.
Because the Series C Preferred was conditionally redeemable, it was classified as temporary or "mezzanine" equity in the financial statements prior to its conversion and redemption in June 2024. Prior to its conversion and redemption it was presented at redemption value as mezzanine equity outside of the stockholder's equity section of the consolidated balance sheets.
On March 28, 2024, the board of directors declared aggregate dividends in the amount of $466 on the Series C Preferred, which was paid on March 29, 2024. On June 28, 2024, the board of directors declared aggregate dividends in the amount of $519 on the Series C Preferred, which was paid on June 28, 2024.
On June 28, 2024, certain shares of Series C Preferred were converted into 16,500,000 shares of Harbor's common stock, and all remaining shares of Series C Preferred were redeemed for $10.7 million. After giving effect to such conversion and redemption, no shares of Series C Preferred remained outstanding. As all of the Series C Preferred was converted or redeemed as of June 28, 2024, mezzanine equity is no longer presented on the consolidated balance sheets after that date.
Debt and Credit Facilities
Payroll Support Program
Beginning in April 2020, Air Wisconsin entered into a series of agreements with respect to payroll support from the U.S. Department of Treasury ("Treasury") under a program provided by the Coronavirus Aid, Relief, and Economic Security Act. Under the first of those agreements, Air Wisconsin received approximately $42.2 million. In September 2020, the Treasury commenced a routine audit in connection with Air Wisconsin's receipt of funds under that agreement. Although Treasury's review of payments made to Air Wisconsin may be ongoing, Air Wisconsin does not believe that it will be required to repay any amount to the Treasury.
City of Milwaukee Industrial Development Bond
In July 2003, Air Wisconsin financed a hangar through the issuance of $4,275 City of Milwaukee, Wisconsin variable rate Industrial Development Bonds. The bonds mature November 1, 2033. Prior to May 1, 2006, the bonds were secured by a guaranteed investment contract, which was collateralized with cash, and interest was payable semi-annually on each May 1 and November 1. In May 2006, Air Wisconsin acquired the bonds using the cash collateral. The bonds are reported as Long-term investments in the consolidated balance sheets. The hangar is accounted for as a right-of-use asset with a value of $1,852 and $2,084 as of December 31, 2025 and December 31, 2024, respectively. The hangar, hangar lease, and related bond remained with Air Wisconsin following the Aviation Disposition.
Maintenance Commitments
As of December 31, 2025, Air Wisconsin was party to a non-exclusive heavy maintenance services agreement for certain maintenance, repair and modification services with respect to airframes owned or operated by Air Wisconsin. The agreement was subject to certain escalation of labor rates and had a term that had been extended through September 2026. Since the maintenance program and related agreements remained with Air Wisconsin following the Aviation Disposition, we do not anticipate incurring any ongoing airline maintenance costs.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that would have or are reasonably likely to have a material current or future effect on our financial condition, results of operations or liquidity.
Seasonality
Our results of operations during the year ended December 31, 2025, and for any interim period were not necessarily indicative of our results for the entire year because the airline industry is subject to seasonal fluctuations, including those relating to holiday and summer travel schedules, changes in weather patterns and natural disasters, as well as fluctuations associated with changes in general economic conditions, including fuel prices, interest rates, inflation, discretionary spending and consumer confidence. Following the Aviation Disposition, we are no longer engaged in airline operations and do not expect our future results to be subject to related seasonal trends.
Critical Accounting Policies and Estimates
We prepare our consolidated financial statements in accordance with generally accepted accounting principles. Critical accounting policies are those policies that are most important to the preparation of our consolidated financial statements and require management's subjective and complex judgments due to the need to make estimates about the effect of matters that are inherently uncertain. In doing so, we must make estimates and assumptions that affect our reported
amounts of assets, liabilities, revenues and expenses, as well as related disclosure of contingent assets and liabilities. To the extent there are material differences between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates on past experience, existing and known circumstances, authoritative accounting guidance, and other factors and assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. For the years presented, our critical accounting policies relate to revenue recognition, long-lived assets, and income taxes. The application of these accounting policies involves the exercise of judgment and the use of assumptions as to the future uncertainties and, as a result, actual results will likely differ, and may differ materially, from such estimates.
We have identified the accounting policies discussed below as critical to us. The discussion below is not intended to be a comprehensive list of our accounting policies. Our significant accounting policies are more fully described in Note 1, Summary of Significant Accounting Policies, in the notes to the audited consolidated financial statements in this Annual Report.
Revenue Recognition
Historically, we derived substantially all of our revenue from capacity purchase agreements with major airlines. In performing an analysis of the American capacity purchase agreement within the framework of Accounting Standards Update ("ASU") No. 2016-02, Leases ("ASC 842") and Accounting Standards Codification Topic 606, Revenue from Contracts with Customers ("ASC 606"), each issued by the Financial Accounting Standards Board ("FASB"), we determined that a portion of the payments we received under the agreement that was designed to reimburse Air Wisconsin for use of a certain number of aircraft, which is referred to as "right of use," was considered lease revenue. All other revenue received by Air Wisconsin under the capacity purchase agreement was considered non-lease revenue. After consideration of the lease and non-lease components, within the context of ASC 842, we determined the non-lease component to be the predominant component of the capacity purchase agreement and elected a practical expedient to not separate the lease and non-lease components. Therefore, all compensation received by Air Wisconsin pursuant to the American capacity purchase agreement has been accounted for under ASC 606.
Because our flights under the American capacity purchase agreement provided distinct services that had the same pattern of transfer to the customer, which were satisfied over time with the measure of progress for each flight deemed to be substantially the same, the flight services provided under the American capacity purchase agreement represented a series of services that were accounted for as a single performance obligation. Therefore, our contract revenues were recognized when service was provided and our performance obligation was determined on a per completed flight basis. The performance obligation of each completed flight was measured using departures.
Under the American capacity purchase agreement, Air Wisconsin was entitled to receive certain payments based on the number of aircraft covered under the agreement, block hours, departures and certain performance metrics. The agreement also provided for the reimbursement to Air Wisconsin of certain direct operating expenses, such as certain insurance premiums and property taxes.
As discussed above, under the American capacity purchase agreement, Air Wisconsin was paid a fixed amount per aircraft per day for each month during the term of the agreement. Accordingly, during the year ended December 31, 2025, Air Wisconsin recognized $4.2 million of fixed revenues that were previously deferred, compared to recognition of $2.9 million of fixed revenues that were previously deferred in the year ended December 31, 2024.
Following the Aviation Disposition on January 9, 2026, we do not have any material operating assets and are not engaged in any operating business. Revenue recognition considerations related to airline operations are no longer applicable to our financial condition and therefore we do not anticipate revenue recognition to be a critical accounting policy in future years.
Long-Lived Assets
As of December 31, 2025, we had approximately $37.5 million of property and equipment and related assets net of accumulated depreciation. In accounting for these long-lived assets, we made estimates about the expected useful lives of the assets, the expected residual values of these assets, and the potential for impairment based on the fair value of the assets and the cash flows they are expected to generate. We also made a determination as to the asset group to be tested and whether the enterprise level is the appropriate level for such testing. Factors indicating potential impairment include, but are not limited to, significant decreases in the market value of the long-lived assets, a significant change in the condition of the long-lived assets, a significant adverse change in the extent or manner in which long-lived assets (asset group) are being
used, and operating cash flow losses associated with the use of the long-lived assets. When considering whether or not impairment of long-lived assets exists, we grouped similar assets together at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and compare the undiscounted cash flows for each asset group to the net carrying amount of the assets supporting the asset group. In the Company's situation the lowest level for which identifiable cash flows are available is at the enterprise level. Substantially all of our operating long-lived assets remained with Air Wisconsin following the Aviation Disposition, and impairment considerations related to airline operations are no longer applicable to our financial condition. As such, we do not anticipate that long-lived assets will be a critical accounting policy in the future.
Income Taxes
The Company utilizes the asset and liability method for accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are determined based upon the estimated future tax effects of differences between the financial statement and tax basis of assets and liabilities, as measured by the current enacted tax rates. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which these temporary differences are expected to be recovered or settled. Deferred tax expense represents the result of changes in deferred tax assets and liabilities. Estimating our tax assets and liabilities involves judgments related to uncertainties in the application of complex federal and state tax regulations. Determining whether deferred tax assets are realizable requires significant judgment, including but not limited to, forecasting the reversal of temporary differences. A valuation allowance is provided for those deferred tax assets for which we cannot conclude that it is more likely than not that such deferred tax assets will be realized. In determining the amount of any valuation allowance, in addition to the reversal of temporary differences, estimated future taxable income as well as feasible tax planning strategies for each taxing jurisdiction, are considered. If we determine it is more likely than not that all or a portion of the remaining deferred tax assets will not be realized, the valuation allowance will be increased with a charge to income tax expense. Conversely, if we determine we are more likely than not to be able to utilize all or a portion of the deferred tax assets for which a valuation allowance was previously provided, the related portion of the valuation allowance will be recorded as a reduction to income tax expense. In addition to our assessment of the need for valuation allowances, we make certain estimates and judgments to determine tax expense for financial statement purposes as we evaluate the effect of tax credits, tax benefits, and deductions, some of which result from differences in the timing of recognition of revenue or expense for tax and financial statement purposes. Changes to these estimates may result in significant changes to our tax provision in future periods. Each fiscal quarter we re-evaluate our tax provision and reconsider our estimates and assumptions related to specific tax assets and liabilities, making adjustments as circumstances change.
As required by the uncertain tax position guidance, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more-likely-than-not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company has applied the uncertain tax position guidance to all tax positions for which the statute of limitations remains open.
The Company is subject to federal, state and local income taxes in the United States. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require the application of significant judgment. The Company is no longer subject to U.S. federal income tax examinations for the years prior to 2022. With a few exceptions, the Company is no longer subject to state or local income tax examinations for the years prior to 2021. As of December 31, 2025, the Company had no outstanding tax examinations.
Upcoming Accounting Pronouncements
For information about upcoming accounting pronouncements, please refer to Note 1, Summary of Significant Accounting Policies, in the notes to the audited consolidated financial statements in this Annual Report.
Stock Repurchase Program
In March 2021, Harbor's board of directors adopted a stock repurchase program pursuant to which Harbor could initially repurchase up to $1.0 million of shares of its common stock during the first calendar month of the program, subject to an automatic increase of $1.0 million per calendar month thereafter. The number of shares to be repurchased, and the timing of any such repurchases, depend on a number of factors, including the trading price and volume of the common stock, the Company's business strategy, financial performance, liquidity position and capital requirements, restrictions in
commercial agreements, general market conditions, applicable legal requirements and other factors. Repurchases may be effected through open market transactions, privately negotiated transactions, or any other lawful means. Harbor may, but is not required to, effect repurchases under a trading plan adopted pursuant to Rule 10b5-1 under the Exchange Act, or subject to Rule 10b-18 under the Exchange Act. Harbor is not obligated under the program to acquire any particular dollar amount or number of shares, and the program may be modified, suspended or terminated at any time and for any reason.
Harbor acquired an aggregate of 63,925 shares of its common stock pursuant to the stock repurchase program during the year ended December 31, 2025. From the inception of the program through December 31, 2025, Harbor has purchased approximately 12.9 million shares of its common stock pursuant to the program. Due to its failure to timely file certain reports with the SEC, Harbor has not repurchased shares pursuant to the program since March 31, 2025.
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